gold ETFs - All posts tagged gold ETFs

Take falling gold prices, add abating inflation fears and mix in the rebound by the U.S. dollar, and what do you have? A bad recipe for gold exchange-traded funds.

Investors are exiting the funds. In fact, over the past three weeks, investors have yanked $1.8 billion from gold ETFs, representing a big chunk of the $3.4 billion in inflows recorded in January and February, according to Markit Research.

As Markit writes:

The US dollar index has appreciated 23% since the end of 2012 with most of the dollar’s relative strength only coming through in the past six months. With the prospect of the Federal Reserve looking to raise interest rates in 2015, the dollar looks set to strengthen further and an increase in yields will hurt the non-yielding precious metal.

Over the past 12 months, outflows totaled $3.5 billion, or 5.7% of the $63 billion managed by gold ETFs.

As for specific ETFs, the SPDR Gold Shares ETF (GLD), with $28.3 billion in assets under management, accounted for $1 billion in net redemptions so far this month. At $114.60, the shares have fallen 8.5% since late January. below the six-month high reached in January.

In was a different picture in Asia, where the market represented the one bright spot for gold products over the last few weeks. Inflows into APAC-listed gold ETFs with assets under management of $2.4 billion, totaled $31.6 million in March.

“Bottom line, gold is money and is not just a contra dollar play, it is a contra fiat currency asset in a world where fiat currencies are being created to an extent the world has never seen.”

A stronger dollar and diminishing inflation expectations have eroded gold’s appeal recently, driving SPDR Gold Shares (GLD) down 8.5% over the past three months. Exchange-traded funds including GLD and its rival iShares Gold Trust (IAU) have suffered major outflows for two years in a row.

Boockvar joins Barron’s Michael Kahn, who wrote on Wednesday that the charts portend a chance for gold to run back up to around $1,250 an ounce, or about 5%, in the short term.

“I am not guaranteeing a rally here, but these are important technical changes that investors should not ignore.”

The poll, which was conducted by the gfs.bern group, shows 38% of respondents in favor of the Save Our Swiss Gold initiative, down from 44% in an earlier poll. Meanwhile, 47% of respondents said they were against the initiative, up from 39%.

Deutsche Bank foreign-exchange analyst, Robin Winkler, said last week that a “yes” vote would “carry significant balance sheet risks” for the SNB and weaken the Swiss franc. He said that that “if an affirmative vote was recorded, there is little political leeway to delay or dilute implementation.”

From Winkler:

The background to the proposal is concern among conservative observers that the SNB’s reduction in its gold reserves in recent years has constituted a plundering of the nation’s intergenerational wealth and economic status. The rationale behind a gold reserve ratio is the perceived association of gold-backed currencies with price stability: the exogenously constrained supply of gold is hoped will restrain the central bank in its creation of fiat money.

September was a relatively positive month for hedge funds, according to new data from eVestment: On average, they rose 1.7% last month, ending up 2.4% for the third quarter.

On an annualized basis, the report notes, this puts the industry on pace to return 7.7% this year, inching ahead of 2012’s 7.2% rise.

However, relative is the operative word here. While hedge funds returned 1.7% last month and 2.4% in the third quarter, that performance was dwarfed by the S&P 500, which rose 3.1% in September and 5.3% in the quarter. The index is also up nearly 20% year-to-date, almost four times hedge fund’s returns.

Not surprisingly then, September continued 2013’s trend of outperformance from equity-focused funds versus other strategies. The report notes commodity strategies and managed futures “were the sole negative marks on an otherwise positive month.”

This news won’t come as a shock to gold investors who have watched the metal take a beating this year and followed recent ETF trends: SPDR Gold Trust (GLD) is down more than 20% for the year, while the Market Vectors Gold Miners ETF (GDX) and Market Vectors Junior Gold Miners ETF (GDXJ) have lost more than 40%. While data from ETF Securities shoed some inflows at last into commodity exchange-traded products in the third quarter, those excluded gold funds.

AdvisorShares, known for its line-up of actively-managed exchange-traded funds, is launching four new gold ETFs that will allow investors to play the yellow metal while at the time minimzing exposure to the U.S. dollar.

Gartman Gold/Yen ETF (GYEN): This actively-managed ETF will offer exposure to gold prices denominated in Japanese yen, offering a creative way to maintain exposure to gold without direct exposure to the dollar.

AdvisorShares International Gold ETF (GLDE): This fund is really a “fund of funds,” according to its SEC filing. in that it will take long positions in the three aforementioned funds. This fund of funds will also take positions in in “one or more unafflicated closed-end funds and other exchange-traded products.

A spokesman with AdvisorShares refused to discuss the new funds, stating the company is in a quiet period because of the SEC filings.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.